At the fifth edition of Pitch2Win on July 30, Iyin Aboyeji, founding partner at Future Africa, and Akio Tanaka, founding partner of Headline Asia, a global venture capital firm, shared critical insights on the future of startups in emerging economies.
The discussion, moderated by Osarumen Osamuyi, the founder of research publication, The Subtext, highlighted key lessons from their experiences as investors, including the fundamental role of a founder’s mindset and the transformative potential of artificial intelligence.
The founder is the most important variable
To start the conversation, Osamuyi asked both investors what their biggest lessons have been in the span of their careers. In response, Aboyeji said: “The founder is the most important variable in a transaction.”
While a market might be great and the team and funding might be in place, Aboyeji argued that if the founder is not truly dedicated to building a large company, all is lost. He has seen people “squander unbelievable opportunities” because the founder lacked the necessary drive.
Tanaka immediately agreed, reinforcing the point with a powerful story of his own mistake. In the early days of his career, he had the chance to co-invest with Jack Dorsey, the founder of Twitter, in a new fintech business, Square.
The idea didn’t make sense to Tanaka at the time because the US market already had a giant like PayPal, so he passed on the opportunity. But six years after its founding, Square, now known as Block, went public with a market capitalisation of $2.9 billion.
“Had I known this insight—you have to look at the entrepreneur—back then, I would have probably made a different choice,” Tanaka said.
Scaling beyond Nigeria: Opportunities and pitfalls
The path to building a successful startup is rarely straightforward. Osamuyi noted that even the brilliant founder can have a vastly different outcome in a different market. This is especially important to think about in Nigeria, where the weakening naira is pushing founders to chase foreign currency and “build for the world.”
Aboyeji noted that this trend comes with a significant risk. He cautioned against the temptation to scale globally without a deep understanding of the target market.
As he bluntly put it, you can’t build a product for London if you’ve never been there and don’t understand the local culture, payment systems, or what customers truly care about. The core advantage of any startup, he argued, is its ability to solve a problem for a customer that everyone else has overlooked or forgotten.
Aboyeji used the experience of Moove, one of his portfolio startups set to raise money at a billion-dollar valuation after expanding across Africa, to illustrate this point.
In Lagos, Moove addressed a specific local problem: talented drivers lacked the financial means and credit access to purchase a car. By providing financing solutions, Moove filled a critical gap. When the startup looked to expand internationally, it recognised a universal truth it had unlocked in Nigeria.
“We unlocked something that everybody else seemed to be forgetting, which was that, well, if the first job most people will do is driving on Uber, they probably don’t have enough money to buy a car, you know,” he said of the portfolio company’s strategy.
This insight became the foundation for Moove’s global strategy.
They successfully replicated their model in London, Dubai, and Germany because they had discovered a problem that resonated across different markets. Aboyeji advises that, like Moove, international expansion should be driven by a profound understanding of a local problem that has global relevance, not a blind chase for foreign currency.
Tanaka offered a contrasting perspective from Japan, where many founders fail to scale globally. He explained that a common strategy is to “build for Japan first because we know this market well. Then, once we figure out Japan, we’ll go overseas.”
However, he noted that most of these startups get stuck in Japan and never achieve the scale of companies like Uber. While Japan is a large market, it’s not big enough for companies to become global giants.
Tanaka contrasted this with Germany, which has produced more unicorns than Japan in the last decade. He attributes this to a shift that occurred in Berlin about ten years ago, where founding teams became more international, including people from Africa, Latin America, and the U.S.
This diversity enabled them to build global businesses with an international DNA from day one. Tanaka noted this lesson is particularly relevant for founders in Lagos, as it highlights that for startups in smaller markets, success lies in building a diverse, international team from the start.
The problem with a “local-only” mindset
Reiterating Tanaka’s point, Aboyeji noted that many Lagos-based companies and founders operate under the belief that everything must be built by Nigerians for the Nigerian market. This approach, however, has a significant downside, he says. A lack of diverse perspectives can stifle creativity and innovation, making it difficult for companies to scale beyond national borders.
“If you look at the table of unicorns, most of those teams are not entirely Nigerian. Maybe except for Flutterwave, most of the founding teams are all international teams,” Aboyeji said. This diversity brings a wider range of experiences, knowledge, and perspectives, which are crucial for building globally competitive products and services.
Despite these opportunities in Nigeria’s tech ecosystem, bureaucratic and infrastructural challenges deter many from coming to Lagos. The visa process is often expensive and unclear, making it difficult for foreign professionals to live and work in the country. Additionally, the city’s real estate market needs significant improvement to provide the kind of living and working environments that international talent expects. Aboyeji’s Itana is building free zones to attract global talent.
Aboyeji says he has directly appealed to government officials, including the governor and commissioner of tech, to take action. “If Lagos wants to remain relevant in the next 5 years, the biggest issue it has to tackle is how it gets global talent to build from Lagos?” he said. Without a strategic effort to attract a diverse, international workforce, “in the next 5 years, we’re going to lose our edge.”
Engaging government productively
Startup founders often struggle with how to engage with the government effectively. According to Aboyeji, the key is to understand three fundamental principles, moving away from the common—and often counterproductive—mindset of seeking government assistance.
Aboyeji argues that founders should not expect the government to pick winners, provide funding, or intervene in their markets. “The more we engage government with a mindset that engaging government will make our startups successful, the less successful our startups become,” he said.
He warns that this approach “ends in disaster” and that startups should keep the government at a distance in this regard. Instead of asking for handouts, founders should see the government as a powerful convener and referee.
The government can create regulations that can build and shape markets, spurring innovation in specific sectors. He says the ecosystem has not yet fully exploited this role. The third principle emphasises the need for startups to work together to create a fair policy environment. Aboyeji cautions against engaging the government on a “selfish basis,” as individual lobbying efforts are temporary and unstable.
“When the government changes, everything will change back,” he explains. By collaborating, the tech ecosystem can collectively help the government do the work of creating stable, long-term policy.
Tanaka offers a different perspective, drawing on a period of innovation in China between 2008 and 2010. During this time, the country operated like a “massive sandbox,” where the unwritten rule was that entrepreneurs could “do anything you want until the government says no.”
This environment of relative freedom from regulation fostered rapid innovation. QR code payments, for example, became widespread in China even before they took off in the United States. Tanaka suggests that the Nigerian government could similarly help by creating a safe environment where entrepreneurs can experiment without facing excessive negative consequences.
AI and the future of African entrepreneurship
Tanaka and Aboyeji discussed the potential impact of AI on the African job market and how Japanese expertise could benefit Nigerian startups.
Aboyeji believes that Africans are poised to become the “human in the loop” for artificial intelligence, providing a competitive global advantage in labor costs. He says that people whose jobs involve repetitive tasks will likely be displaced by AI, but in Africa, this could be a major opportunity.
Tanaka added that in Western countries, AI may be bad news for high-paying, white-collar office jobs, like those in law or accounting. He pointed out that plumbers and electricians are now commanding higher rates as their skills are not easily automated. He also noted a shocking trend in the U.S.: for some top universities, the highest unemployment rate for new graduates was in computer science, suggesting that even some tech jobs are becoming vulnerable.
For entrepreneurs, however, Tanaka believes AI is creating a golden age. Startups can leverage AI to build bigger companies faster with less capital, meaning they won’t need to give up as much equity to investors. He is looking forward to seeing the first 10-person African startup generate one hundred million in revenue.
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